LAN Airlines Reports Net Income of US$320.2 Million for Full Year 2011 and US$112.5 Million for Fourth Quarter 2011

SANTIAGO, Chile--(BUSINESS WIRE)--LAN Airlines S.A. (NYSE: LFL), one of Latin America’s leading passenger
and cargo airlines, announced today its consolidated financial results
for full year and fourth quarter ended December 31, 2011. “LAN” or “the
Company” makes reference to the consolidated entity, which includes
passenger and cargo airlines in Latin America. All figures were prepared
in accordance with International Financial Reporting Standards (IFRS)
and are expressed in U.S. Dollars.

HIGHLIGHTS

LAN reported net income of US$320.2 million for full year 2011.
Results in 2011 were driven by solid demand, strong yields and high
load factors in both passenger and cargo operations. Nevertheless, net
income decreased 23.7% compared to the US$419.7 million reported in
full year 2010, mainly due to the impact of the startup of LAN’s
operations in Colombia and the volcanic ash cloud that disrupted air
traffic throughout the region, as well as higher fuel prices, a
portion of which was not recovered via the fuel surcharge mechanism.

For full year 2011, operating income reached US$539.7 million, a 13.4%
decrease compared to the US$622.9 million in full year 2010. Operating
margin reached 9.4% a decrease of 4.3 points compared to 13.8% in 2010.

For fourth quarter 2011, LAN reported net income of US$112.5 million,
a decrease of 31.6% compared to the US$164.6 million reported in
fourth quarter 2010. Results in the fourth quarter 2011 reflected
costs related to the startup of LAN’s operations in Colombia and the
ongoing effects of the volcanic ash cloud on domestic operations in
Chile and Argentina, as well as the 28.8% increase in fuel prices, a
portion of which was not recovered via the fuel surcharge mechanism.
Nevertheless, LAN continued to show solid traffic growth and yield
increases in both passenger and cargo operations.

Total revenues in fourth quarter 2011 reached US$1,535.3 million
compared to US$1,302.5 million in fourth quarter 2010 due to a 20.8%
increase in passenger revenues and a 15.8% increase in cargo revenues.
Revenue increases continue to reflect solid demand trends in both
passenger and cargo operations. Passenger and cargo revenues accounted
for 69.9% and 27.9% of total revenues, respectively, in fourth quarter
2011.

In December 2011, the Company launched the LAN brand in Colombia, a
significant step in the successful turnaround of the Colombian
domestic passenger operations undertaken in 2011. In fourth quarter
2011, LAN recognized a US$21 million operating loss from its Colombian
passenger operations. This loss includes significant costs related to
the rebranding process, migration of LAN Colombia to LAN’s IT systems,
marketing initiatives aimed at integrating Colombia into LAN’s
regional network, and one-time maintenance costs.

In line with the Company’s expansion, the Company received 1 Airbus
A319, 5 Airbus A320 and 2 Boeing 767-300 passenger aircraft in fourth
quarter 2011.

During fourth quarter 2011, LAN and TAM S.A. (“TAM”) continued to
advance on the merger transaction to create LATAM Airlines Group S.A.
(“LATAM Group”). The companies have obtained all required anti-trust
and shareholder approvals and are currently in the process of
registering the transaction with the relevant securities authorities.
LAN will launch the exchange offer promptly after all required
registrations with securities authorities are complete and the Supreme
Court of Chile has resolved LAN’s pending appeal regarding the
carve-outs imposed by the TDLC (Tribunal de Defensa de la Libre
Competencia, Chile’s antitrust authority). The Company expects
this will occur before the end of first quarter 2012.

In January 2012, LAN and TAM announced a revised estimate of expected
synergies to be achieved through the merger of the two airlines. LAN
and TAM estimated that the combined synergies arising from the
proposed combination could increase LATAM Group’s annual operating
income over time to between US$600 million and US$700 million, before
depreciation and taxes, beginning four years after completion of the
transaction. This represents a 50% to 75% increase over the initial
synergy estimate of US$400 million per year, announced in August 2010.

LAN Airlines is one of the leading passenger and cargo airlines in Latin
America. The Company and its affiliates serve over 100 destinations
around the world through an extensive network that offers full
connectivity within Latin America, while also linking the region with
North America, Europe and the South Pacific, as well as 70 additional
international destinations through its various code share agreements.
LAN Airlines and its affiliates have a leading position in their
respective domestic markets of Chile and Peru as well as an important
presence in the Argentinean, Ecuadorian and Colombian domestic markets.

Currently, LAN Airlines and its affiliates operate 135 passenger
aircraft while LAN Cargo and its respective affiliates have a fleet of
14 dedicated freighters. The Company has one of the youngest fleets in
the world which has meant greater efficiency and a significant reduction
in CO2 emissions, reflecting its strong commitment to the protection of
the environment.

LAN is one of the few Investment Grade airlines in the world (BBB). The
Company’s world class quality standards enabled its membership in oneworld™,
an alliance of leading global airlines of which LAN has been a member
for 10 years. For more information please visit www.lan.com
or www.oneworldalliance.com

Note on Forward-Looking Statements

This report contains forward-looking statements. Such statements may
include words such as “anticipate,” “estimate,” “expect,” “project,”
“intend,” “plan,” “believe” or other similar expressions.
Forward-looking statements are statements that are not historical facts,
including statements about our beliefs and expectations. These
statements are based on current plans, estimates and projections, and,
therefore, you should not place undue reliance on them. Forward-looking
statements involve inherent risks and uncertainties. We caution you that
a number of important factors could cause actual results to differ
materially from those contained in any forward-looking statement. These
factors and uncertainties include in particular those described in the
documents we have filed with the U.S. Securities and Exchange
Commission. Forward-looking statements speak only as of the date they
are made, and we undertake no obligation to update publicly any of them,
whether in light of new information, future events or otherwise.

This press release relates to a proposed business combination between
Lan Airlines S.A. (“LAN”) and TAM S.A. (“TAM”), which will become the
subject of a registration statement and prospectus to be filed with the
SEC by LAN and a new entity to be formed in connection with the
combination. This press release is not a substitute for the registration
statement, prospectus and offering materials that LAN and the new entity
will file with the SEC or any other documents that they may file with
the SEC or send to shareholders in connection with the proposed
combination. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE
REGISTRATION STATEMENT, PROSPECTUS, EXCHANGE OFFER DOCUMENTS AND ALL
OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC AS
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED BUSINESS COMBINATION. All such documents, if filed,
would be available free of charge at the SEC’s website (www.sec.gov)
or by directing a request to LAN Investor Relations, at 56-2-565-8785 or
by e-mail at investor.relations@lan.com,
or to TAM Investor Relations, at 55-11-5582-9715 or by e-mail at invest@tam.com.br.